jfan

Just went back to some of Satoshi's emails (from the book of Satoshi). There was a couple pages on his thoughts of 51% attacks. "According to the "long tail" theory, the small, medium, and merely large farms (server) put together should add up to a lot more than the biggest zombie farm" My interpretation here is that it would be more profitable for these smaller farms that knowing they can't pull a 51% attack, would merely comply to the bitcoin protocol to be profitable, and that it was his thought that there would be many more small server farms choosing this rather than do some complicit like double spend. He further discusses that chain formation where different miners are forming various block templates (with transactions) that are occurring at the same time, where ultimately the proof-of-work (ie the longest chain), will be the valid chain, and all subsequent templates will be invalid. This process can take up to 1 hour to be immutable, but within that time transactions could be placed back into the mempool if they end up in the invalid chain. With the transaction fees in place, there should be always some miner out there willing to incorporate transaction requests, but the question than goes back to whether they have enough computational power to solve SHA-256 puzzle. It would be then dependent on the long-tail of honest nodes running the system having proportionally more compute. This in turn is dependent on whether these miners are incentivized by bitcoin block fees. It seems to me that the incentive to join these mining pools might weight more heavily on having a steady stream of income in fiat dollars rather than earning bitcoin itself. It is not clear to me why any larger mining company would ever join a pool, and why a very small miner would need one if their electricity costs are de minimis. But perhaps, there are many more small miners with just a few 100+ TH/s ASIC miners that can't afford the ability to host their own mining equipment using these pools, where their incentive to be profitable in fiat terms rather than bitcoin terms.

The Howey 4-part Test - Is it a security? (1946) 1) Is it an investment of money or assets? 2) Is the investment in a common enterprise? 3) Is there reasonable expectation of profit? 4) Is it reliant on the efforts of a promoter or others? I tend to agree that these tokens are more securities than "utility" tokens. 1) Joe public exchanges money for these tokens to get access to private Manhattan dining experience 2) There is a single enterprise involved - this is a bit grey, the more desirable the dining experience, the greater the restaurant's profit which suggests a scarcity in the supply for memberships, to which the token owner can lease out their membership to another for rent. 3) The ability to buy and sell tokens in a market place for the expectation for profit (assuming the demand for membership > supply of membership) or profit from leasing the token to another 4) It is reliant on the management team to create a desirable dinner (therefore profitable) experience. I'm pretty sure that FlyingFish probably took in the ICO proceeds and booked it as deferred revenues to avoid taxes (as in the case of booking these proceeds as current revenues) and avoid securities registration (ie booking the proceeds as equity). If there were a number of disparate restaurants with different owners participating in a network that issued tokens that people can use to buy-sell for a unique experience that restaurants could accept as payment, perhaps this system is more utility like than security. Below is the SEC settlement

You are absolutely right. Gensler's MIT course quoted ~ 1500 cryptotoken projects back in 2018. Only 1.5% of these projects actually had a working prototype network. >70% of them were just ideas that someone just published. Most of these stuff is junk and even if you create a popular coin, the originator, if they are holding a substantial number, can't offload without destroying the price. Certainly this is a reflection of people, their love of a narrative, their gambling nature, and tendency for people to cheat and fleeces others. These decentralized crypto-assets are a bit of a paradox. Decentralization and finality of data transfer among non-trusting parties face what Gensler terms it "collective action" problems ie how do you incentivize people who don't trust each other to jointly all use a network protocol that at the same time solves some cost issue (eg verification cost, governance cost, etc). Even permissioned blockchain projects such as the one the Australian Stock exchange was trying to get up and running failed and now facing legal action.

I went back to listen to the 2024 annual meeting and Marek was describing the 3 columns and the capital intensity (ie soft and hard dollars) at 44 minutes. He said that the majority of the capex spend occurred when the homesites move into platted/underdevelopment column. I assume the capex for homesites sold in 2024, probably occurred in 2021 to 2023 (? over a 3 year period) and that a larger portion is spent in the early years vs later on. They report total net residential capex each year since 2015 but not by individual community. Is the company willing to share with investors this granularity? @thepupil I'm not sure if this is the correct approach but in the footnotes, they describe capitalization of their real estate development expenditures (see below). This would smooth the numbers but may not reflect the actual cash expenditures. Since I don't have the community by community data, nor the exact timing or magnitude of the expenditures, I thought perhaps another way to look at this from an aggregate bird's eye view of the issue, is by looking at the cumulative totals over time and calculating the per unit revenues and capex with each passing year. My rough guess is that they moved ~ 6000 homesites through column 1 (platted/under development) since 2018. This is all backwards looking of course.

@TorontoChaosTheatre Francis has tremendously changed my families' lives. I have the utmost respect for him, his character, his values and his work ethic. He is not Buffett, Munger or Prem, but internalizes their wisdom to suit his own personal style. He is a gem. Being a mutual fund manager is challenging, always dependent on the fickleness of your fundholders and their lack of patience. I am truly glad that Francis has found a permanent capital vehicle to which he can do his thing. I know Francis is very private and humble but Wintaai has outperformed Fairfax and Berkshire by leaps and bounds over the past 4 years. I found it refreshing that he is doing this in private away from fickle fundholders, shareholders in a low cost manner. Is he infallible? No. But he doesn't carry himself to be all-knowing. This quality is very unvalued amongst money managers.

Contrast Gensler's interview with Coinbase's head of legal. It is extremely odd that a publicly traded for-profit business that relies on legitimacy from the government would be so audacious in such a public forum. I've been watching Gensler's MIT blockchain course and listening to John Brook's book the Go-Go Years (of the 1960s). Brook's description of the unscrupulous activities of brokers, stock exchange members, the stock exchange itself, the conglomerates undisciplined deal-making, leverage, mutual fund democratization for the uneducated investing public reminds me very much of this crypto space. This in contrast to the potential value that blockchain fundamentals could provide. This was recently posted. Haven't listened to the whole thing but seems useful.

What was the Blocksize War? The Blocksize Wars Revisited: How Bitcoin’s Civil War Still Resonates Today Some reflections on the Bitcoin block size war 3 Links that review and summarize the blocksize war events, clues on bitcoin's governance and attitudes towards adopting new technological capabilities, and Vitalik's take on Bier and Ver's books on the blocksize wars. A Closer Look at Bitcoin’s Volatility The last link is a recent Fidelity write-up on bitcoin's volatility and its progression over time.

This website has a map (live and non-live) of reachable bitcoin nodes globally. Reachable Bitcoin Nodes - Bitnodes In 2018, there were 10,000 reachable bitcoin nodes to give some context. In terms of global reachable and unreachable nodes, today it is ~ 66,000. Over the past 90 days, there was a total of ~500K global reachable and unreachable nodes. Below is the number of reachable nodes over the past 8 years.

Are you referring to Murray Stahl specifically or the rest of the TPL board? Have you looked at prairiesky, it's a pure Canadian oil and gas royalty company (but no surface rights however)?

The crown jewel is the part ownership of helios the asset manager.

https://ocw.mit.edu/courses/15-s12-blockchain-and-money-fall-2018/video_galleries/video-lectures/ Gary Gensler's MIT blockchain course videos for those interested.

thanks for highlighting this article. I read this paper when it came out and coupled with Mike Green/David Einhorn's thoughts on this structure , have been thinking about where the puck is going in the next couple decades. I wonder if this is evolving into an age of conglomerates again. With small public businesses not getting any investor attention, it seems ripe for someone to consolidate them and control the cash flows in a private manner. Berkshire started this trend, and Fairfax is following, with increasing dollars allocated to private investments or take-private transactions. It is a bit of a conundrum wrt to the ease of accessing public investments at a low cost these days with more than plentiful information out there at our fingertips and the opportunity for decent future returns. The market structure seems to drive exponentially asset prices for those loved public equities and ignore everyone else. Coupled with the inherent laziness to actually do the work to understand what we are buying and owning, I feel people are just relying on the 1st order concept that "the market will return 7% indefinitely as they have in the past" which drives more market distortions. Investing is simple but not easy to do well.

Curious, what did you try and why did you choose what you did?

@SharperDingaan this is a great example but the one thing I would add to this wrt to using a company's share price as a currency in this context, is that the when o/g commodity prices are up, their acquisition targets are also pricey, and hence at best a neutral but more likely value destructive due to expensiveness and bidding wars for the assets. It only makes sense if you can find cheap targets in preferably a fragmented market. @73 Reds Investing is very much like Yin & Yang, there is a balance between sticking to what works and being intellectually curious to learning new frameworks. What I feel I can learn from the Bill Millers, George Soros and the best traders out there (not that I am one), is their ability to acquire, assimilate new information, and pivot and change their minds in the face of disconfirming evidence. Kudos to you for exploring new ideas. @ArminvanBuyout I have not studied these companies in extensive detail to understand all their products and strategies, but what I would add is that these potential over-price high-tech businesses use their expensive shares to acquire human capital (maybe not other businesses), which at some point lead to 2 problems: 1) diseconomies of scale wrt to its growing workforce, 2) ever increasing need for higher share prices to keep their work force happy which at points in time could be too expensive for their productive value. I suppose at some time there will be a reckoning here as well as it did happen in the dot.com bubble, unless management is so good as to organize themselves to be continuously innovative and find new markets over time eg Amazon's Bezo days. Costco is an interesting thought as well wrt to its expensive share price and lack of increasing of their overall share count, obviously we know that this is a high quality business, I guess we can think of its heady stock price as an untapped resource that gives it optionality in the future.

Quote from William Thorndike's Outsider chapter on Singleton "Singleton took full advantage of this extended arbitrage opportunity (lofty conglomerate P/E ratios, low competition for acquisitions), and between 1961 and 1969, he purchased 130 companies in industries ranging from aviation electronics to specialty metals and insurance. All but 2 of these companies were acquired using Teledyne's pricey stock." Reading the above 2023 case study, and excerpts from Thorndike's book, this was just one capital allocation factor, he also utilized purchase price discipline, targeted specific technological niches, and ran a particular decentralized organization (that later was deemed inefficient) in addition to focus on cash flows. It seems known when to growth, how to grow, the environment that you operate in, and financial levers that can be pulled, in addition to management incentives/motivation are all key decision factors.

Purchasing over-valued stocks in businesses that use their shares as currency is fought with risk and I would agree that most of the time this does not work in the long run. I think the primary danger of these roll-ups is the people element ie it gets really addictive to see those revenues, cash flows, and stock prices go up and to the right over time. Doing this as the only business strategy will most likely end in failure ie conglomerates in the 1960s (ITT, Litton), Mississippi Bubble, South Seas Bubble, etc. Similarly, Cathie Woods' business of pumping world-changing tech companies based on a story, is also not investing but gambling/speculating. However, that said, I think we can learn something from everyone including her (ie she introduced me to the mental model of Wright's law which I later read in Bionomics - which was an interesting read btw). But for the few truly good allocators out there, using their stock as an acquisition currency, is a lever that can be sometimes pulled or repetitively pulled in the right situation for the long-term. Other examples that come to mind (please correct me if I'm wrong about the details) - Buffett issuing shares to purchase GenRe during the height of the dot.com mania - Prem issuing shares to purchase undervalued insurance companies during the early 2000s - Singleton during the 1960s using Teledyne shares to serially acquire companies (see link below) The reason I started this thread was not promote buying over-valued growth stocks especially when the market feels toppy (and Buffett is a net seller, holding lots of cash), but better understand the rare situations when this is actually rational and why. Just like buying low PE stocks without discrimination and concentrating them in your portfolio, isn't intelligent either. Eliminating ALL over-valued growth stocks without discrimination could result in a significant opportunity cost. PS: found this case study about Teledyne that people might enjoy reading Teledyne Technologies—A Conglomerate Phoenix That Rose from the Ashes with Henry Singleton’s Corporate DNA Intact

A Thought Experiment It is common occurrence where overvalued companies often issue shares to purchase other businesses. If the other business is cheap, you can create a roll-up strategy that incrementally puts the expensive multiple on the cheaply valued acquisition cash flows (if there is any). The problem is that most of these acquirers, overpay, over-estimate the synergies, under-estimate the integration costs, and with ever enlarging human capital, there are diseconomies of scale aka bureaucracy. Now what happens if you do have a good capital allocator, who does actually use their expensive shares to buy truly inexpensive/undervalued assets and has the ability to do this over and over again? Most of these stocks are often expensive and have a price chart that is up and to the right. But most value investors want to pay for things that are cheap, with low expectations. It is quite comfortable for them to pay for a business that has a declining price, and with some work, decided that the consensus is wrong, and expectations are far too low, and cheer when the business buys back its stock. However, this former over-valued case, it too creates value, just in the opposite direction. But it feels really weird for traditional value investors to buy such things. So let's accept this weirdness for a moment, what sort of asset characteristics would be a great purchase? 1) requires little maintenance capex 2) has potential to appreciate by adding adjacent revenue streams, increasing network effects for the acquiring business, allows you to marginalize other competitors 3) low risk for integration 4) high certainty of synergies 4) truly undervalued/underappreciated at the current purchase price. Now let's say, this company can keep doing this, and eventually get taken up into a major index. Now the index investors who are not price conscious, are forced to keep buying the marginal shares. This increases the stock price further, which allows the capital allocator to issue more shares to purchase more undervalued assets. So from an asset/share point-of-view, you the minority shareholder, gets more assets/share incrementally despite more absolute shares joining the float. a) Should you entertain investing in these businesses? b) Would you pay a premium to Net asset value for such a business? And if so, how much of a premium? c) How and when would you decide to buy them? Examples of the top of my head - Facebook buying WhatsApp and Instagram - Franco Nevada issuing shares to purchase more royalties - MicroStrategy issuing shares to buy BTC

Just curious, where does everyone think BTC will top out this cycle? 1) $150K 2) $200K 3) $250K 4) $300K+ My vote $300K.

@SafetyinNumbers Great podcast! Thank you!

The supply is built into the codebase. To make a change requires the a majority of the nodes to agree to the change. During the blocksize wars, the miners wanted the network to change to increase transactional throughput and misjudged the degree of voting power they had. They assumed that having all the hashing power gave them more influence. However, the node operators and open-source programmers were able to mount a response rejecting their hard fork proposal. As with any voting system, it does require the node operators to be educated well enough to reject such changes. That said, most people (including myself) are not technical, so to some degree we rely on the open source ecosystem to keep the network true to its roots. This is a risk. But as the system grows, it will be harder and harder to achieve any consensus, and hence most proposals will be in deadlock, and the existing codebase will not change.

You are welcome. The root on X, @therationalroot has some really interesting ideas and put together some visualization with historical BTC data. He has some interviews on YouTube that you might enjoy. Caveat: some of the interviewers are a bit nutty

@73 Reds There are a number of models out there that different people have proposed in terms of valuation. Every model has some limitations, but even our traditional finance models have limits (ie DCFs, relative valuations, P/E & P/B ratios etc). In addition to @TwoCitiesCapital's models mentioned, another one that I found useful is on Charles Edward's Medium posts (he runs a digital asset fund) Bitcoin’s Production Cost. An Estimate of Bitcoin’s Production and… | by Charles Edwards | Capriole | Medium Bitcoin Energy-Value Equivalence. The Intrinsic Value of Bitcoin as… | by Charles Edwards | Capriole | Medium More simplistic relative models include % market cap relative to gold, relative to dollar-denominated debt, relative to real estate. Others have analysed the blockchain for ratio signals or wallet distribution/activity to look for over and under-valuation moments. Glassnode is a service you can sign-up and learn/use their data. Greg was quite astute that sometimes it just "feeling" the secular sentiments and behaviour change in the population over time (paraphasing him: digital adoption, level of trust in government, computing power, open-source technologies, etc) @wachtwoord posted a really good document here a while ago. I've attached it below. Even Cathy Wood has some reading material that might shed some light. I don't think it will get you the precise answer you are looking but might be a starting point. Buried within Edwards blog, is a quote from Satoshi about how he thought initially the production costs will drive BTC's value but as this drops, the transaction fees will play a much larger role in the future. This then requires a functioning market that obeys general supply - demand for block space. John Pfeffer - An Institutional Investors Take on Cryptoassets - 2017 Dec.pdf

I was just looking at the miner innovation over time. The current 2024-25 models have up to 860 Th/s with an energy efficiency of 13 J/Th at a $19/Th pricing. If look back to 2018 for example, a miner might have 20.5 TH/s with an energy efficiency of 75 J/Th at prices between $50 - 200/Th. Despite, the total hash rate going up over time, the cost and the energy efficiency to run the network gets lower and better pretty consistently.